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Forms 1099

Form 1099-NEC is a new form for 2020. The Form 1099-NEC reports nonemployee compensation which was previously reported in Box 7 of Form 1099-MISC. The Form 1099-NEC needs to be mailed to recipients and filed with the IRS via paper or electronically by February 1, 2021.

Forms 1099-MISC, 1099-INT, 1099-DIV and 1099-R need to be mailed to the recipients by February 1, 2021. These 1099 forms are due to the IRS by March 1, 2021 for paper filing and by March 31, 2021 for electronic filing. A 30-day extension is possible to obtain for all Forms 1099 except for the 1099-NEC.

The IRS has added questions to all business income tax returns asking if the business is required to file Forms 1099 and, if so, did or will the business file all required Forms 1099. Due to these questions, filing Forms 1099 is even more important. It is reasonable to assume that the IRS will look at the questions on income tax returns and follow-up with businesses regarding why the business failed to file required Forms 1099.

A Form 1099-NEC is required to be issued to all non-corporate (including some LLC) vendors and contractors from whom you purchase services totaling $600 or more during 2020. Services include accounting fees, landscaping, janitorial services, printing, repairs and directors’ fees to name a few. Prizes and awards related to services performed are reportable on Form 1099-NEC. All attorneys receiving $600 or more in payments for legal services are required to be issued a Form 1099-NEC whether the law office is incorporated or not. Misenhimer, Aivazian & Tennant is incorporated, so you do not need to issue us a Form 1099-NEC.

A Form 1099-MISC is required to be issued to all non-corporate (including some LLC) vendors for real and personal property rent payments (Box 1), prizes and awards that are not for services performed (Box 3) and gross proceeds paid to an attorney for a settlement (Box 10). All attorneys receiving $600 or more in settlement payments are required to be issued a Form 1099-MISC whether the law office is incorporated or not. You should use Form W-9 (www.irs.gov) to request name, address and tax ID number from your vendors.

An LLC filing as a sole proprietor (Schedule C) or as a partnership (Form 1065) is required to be issued a Form 1099. If the LLC elects to be taxed as a C corporation or an S corporation, the LLC does not need to be issued a Form 1099. The Form W-9 discussed in the prior paragraph will tell you how the LLC is taxed.

You do not include payments to vendors paid with a credit or debit card. The credit card company will issue a Form 1099-K to those vendors.

The IRS can assess a penalty for late filing or failure to file Form 1099s up to $1,120 per Form 1099. Additionally, the IRS is able to assess 24% back-up withholding against the business for the amount the business paid to vendors and did not report to the IRS. The IRS can also disallow the income tax deduction.

Please start accumulating the data for your vendors who need a Form 1099 issued to them. If you use QuickBooks or Peachtree, update your vendor information and make sure vendor names, addresses and tax identification numbers are correct. Also, reconcile your bank accounts through December 31, 2020 and address old outstanding checks. You need to make sure that all vendors that should be issued a Form 1099 are marked “vendor eligible for 1099” on the Tax Settings Screen for the vendor in QuickBooks. If you use
“other names” instead of “vendors” in QuickBooks, please convert all “other names” needing a Form 1099 to be a “vendor” in QuickBooks. You can do this by using the “Change Type” button on the other names screen.

With the addition of Form 1099-NEC, you will need to look at your 1099 set-up in whichever software you are using for 1099s.

If you would like us to prepare your Forms 1099, please get us the information by January 15, 2021. If the 1099 information comes in after that date, we may not be able to get the forms 1099 completed by February 1, 2021. We will work on the Forms 1099 based on the date they arrive in our office.

Required Electronic Payment for Arizona Withholding, Transaction Privilege (Sales) Tax and Income Tax Payments

Beginning in 2021, Arizona requires all businesses with annual payments exceeding $500 for Arizona withholding, sales tax or income tax to make their tax payments electronically instead of mailing checks. If your payments exceed $500 for one of those taxes and you have not done so, go to www.aztaxes.gov and register so you can make your payments electronically. You only have to pay electronically for the type of
tax which exceeds the $500 threshold although you can pay electronically even if it is not required.

You should start the registration process now if you are not registered. The registration and account linking can take time and may involve mailing an account update form which takes 10 – 15 business days for Arizona Department of Revenue (ADOR) to process.

You are required to file your transaction privilege tax reports electronically if your annual payments exceed $500. Anyone with a transaction privilege tax license needs to renew the license at www.aztaxes.gov or by mailing the renewal form by January 1, 2021.

Retail Internet Sales

There are changes in sales tax reporting and remittance to Arizona and other states for internet retail sales. This is a very complicated area. If you are engaging in internet sales, you need to be sure you are reporting as required. Please call our office to discuss.

Cryptocurrency

The IRS is scrutinizing the reporting of cryptocurrency and added a question to the income tax return regarding it beginning in 2019. If you personally or your business uses cryptocurrency, contact us so we can insure you are reporting correctly.

If you have any questions, please call our office.